Quantitative Analysis of Financial Data
These questions cover the analysis of data, and the selection and use of copulas
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Question 1 of 5
Which of the following statistical distributions might be suitable for modelling the returns on a portfolio of assets?Correct
The log-normal, gamma and pareto distributions are all lef-bounded at zero, so are unsuitable for modelling returns (which can usually be both positive and negative)Incorrect
Question 2 of 5
State which of the following is (or are) true in relation to stochastic simulations using principal component analysis (PCA)Correct
The first principal component is the one with the largest eigenvalue; each eigenvalue represents the variance of that principal componentIncorrect
Question 3 of 5
Which one of the following correctly describes the process for evaluating an Archimedean copula?Correct
Question 4 of 5
If two asset classes are linked by a Clayton copula with a parameter (a) of 6, what is the correlation between these asset classes as measure by Kendall’s tau?Correct
Kendall’s tau is given by a/(a+2), so 6/(6+2)=0.75Incorrect
Question 5 of 5
Match each of the following equations to the correct description
- Auto-regressive process
- Moving average process
- Integrated process
- Trend stationary process
- White noise process